James B. Bullard

James Bullard is the chief executive officer and 12th president of the Federal Reserve Bank of St. Louis, positions he has held since 2008. He is currently serving a term that began on March 1, 2011. In 2014, he was named the 7th most influential economist in the world.[1]

Bullard joined the Federal Reserve Bank of St. Louis in 1990 as an economist in the research division. Prior to becoming president, Bullard was vice president and deputy director of research for monetary analysis at the Federal Reserve Bank of St. Louis.[5]

Bullard succeeded William Poole as president of the St. Louis Federal Reserve Bank on April 1, 2008. According to Fed salary figures released for 2013, Bullard earns $281,300 per year, at the low end of the range for the 12 regional bank chairs but still considerably more than Fed chair Janet Yellen ($199,700), whose pay is limited by law.[6][7]

As the St. Louis Fed president, Bullard participates on the Federal Open Market Committee (FOMC), the Federal Reserve’s chief monetary policymaking body, and was a voting member in 2010 and 2013.[8] He directs the activities of the Federal Reserve's Eighth District head office in St. Louis and branches in Little Rock, Ark., Louisville, Ky., and Memphis, Tenn.

In November 2009, Bullard opined that the central bank should extend its mortgage-backed securities buying program beyond its expiration date in March 2010, which would (according to the New York Times) keep interest rates low and help keep the dollar weak.

In his “Seven Faces” paper, Bullard argued it may not be prudent to rely on a near-zero policy rate alone to keep the U.S. out of the deflationary outcome; he recommended that current interest rate policy be supplemented with additional quantitative easing, an unconventional monetary policy tool.[16]

The Federal Reserve engaged in two large-scale asset purchase programs between 2009 and 2011, commonly referred to as the first and second rounds of quantitative easing, or QE1 and QE2. Both programs had detractors, including those who likened the policy to “printing money.” Other economists said that QE2 either had no effect on the economy or was counterproductive.[17] However, after QE2 ended in June 2011, Bullard said that QE2 worked and it “demonstrated that the Fed can conduct an effective monetary stabilization policy even when policy rates (the federal funds rate) are near zero."[18] Responding to Bullard’s assertion, David Nicklaus of the St. Louis Post-Dispatch wrote, “The problem for the Fed, of course, is that neither QE1 nor QE2 has yet brought about a vigorous economic recovery ... Bullard and other Fed policymakers may be convinced that they have a powerful new tool at their disposal, but they still need to persuade the public that it works.”[19]

Bullard argued that while the effects of QE2 on the financial markets occurred during the run-up to the FOMC’s decision to pursue the program, policymakers expected the effects on the real economy (e.g., consumption and employment) to occur between six and 18 months after the policy action—which happens with conventional monetary policy as well; but then analysts may have difficulty determining exactly which movements in real variables are due to monetary policy and which ones are due to other influences on the economy that occur in the meantime, he said. “Disentangling these effects is a standard problem in monetary policy analysis,” he said, adding that “the real effects of the asset-purchase program will most likely be conventional, just as the financial market effects were.”[20][21]

While Bullard has supported the Fed’s use of quantitative easing, he argues that it is rarely optimal for the Fed to use the “shock and awe” approach to this policy, wherein the Fed announces a large purchase with a predetermined purchase size and fixed duration like QE2. Rather, he has stated he favors a “state-contingent” policy path similar to how the FOMC adjusts the federal funds rate on a meeting-by-meeting basis: “Any policy path should be reviewed carefully and seriously at each meeting for possible adjustment given the incoming data.”[22][23]

In the wake of QE2, Bullard maintained that even with the policy rate near-zero, the Fed still has tools to combat economic weakness. He calls the central bank’s balance sheet policy “the most natural and effective tool for this purpose.”[24] However, Bullard, along with Dallas Fed President Richard Fisher, disagreed with affixing a calendar date to policy. According to Reuters, "Bullard and Fisher do not represent the consensus view championed by Fed Chairman Ben Bernanke, who has strongly hinted at the possibility of further action. But they do remind investors that the central bank will not be united if it decides to delve even further into the realm of unconventional monetary policy."[25]

In February 2012, Bullard told Reuters that a third round of quantitative easing would only be necessary if the U.S. economy deteriorates and inflation drops, adding that the U.S. economy was not in such a situation.[26] On Sept. 13, 2012, the FOMC announced the third round of bond-buying, dubbed QE3. Bullard, who was not a voting member of the FOMC at that time, told financial media that he would have voted against QE3: “I would have voted against it based on the timing. I didn't feel like we had a good enough case to make a major move at this juncture,” Bullard told Reuters.[27]

At the June 18–19, 2013 FOMC meeting, in which the committee authorized Fed Chairman Ben Bernanke to discuss an approximate timeline for winding down its quantitative easing program, Bullard dissented for the first time in his tenure as president of the St. Louis Fed. He said the committee "should have more strongly signaled its willingness to defend its inflation target of 2 percent in light of recent low inflation readings." He also again signaled his preference for a state-contingent monetary policy, rather than a calendar-based approach, noting that the announcement of an approximate timeline for tapering "was a step away from state-contingent monetary policy."[28]

Bullard has argued that the Fed should focus on headline inflation and de-emphasize core inflation, which has been a long-standing issue for the FOMC. In a May 2011 speech to the Money Marketeers Club in New York City, Bullard said that, “Many of the old arguments in favor of a focus on core inflation have become rotten over the years. It is time to drop the emphasis on core inflation as a meaningful way to interpret the inflation process in the U.S.” And in a May 2011 column in the Southeast Missourian, Bullard wrote that, “The emphasis on core inflation may give the impression that the FOMC does not take into account some important price changes when making decisions about monetary policy. This is damaging Fed credibility in Main Street America.”[29][30] Further, although two different price indexes are popular for measuring overall inflation (the consumer price index and the personal consumption expenditures index), in 2013 Bullard suggested adopting a standard measure that is consistently used to estimate and adjust for inflation that consumers face.[31]

Bullard stated in May 2011 that the FOMC should adopt an explicit headline inflation target, which “would allow discussion of other measures of inflation in the context of a clearly stated ultimate goal with respect to the price side of the dual mandate.”[32]

Also, the St. Louis Fed president has stated that inflation targeting is the modern successor to the commodity standard and is the better choice in the current environment. While a commodity standard forces some accountability on the central bank, in the past “it did not always work because governments sometimes changed the rate between the commodity and the currency,” Bullard said. Inflation targeting also forces more accountability to the central bank and anchors longer-term inflation expectations. He said that with inflation targeting, the central bank would have to specify its goal with respect to inflation and would be held accountable for achieving that goal.[32] On Jan. 25, 2012, the FOMC set an inflation target of 2%, as measured by the annual change in the price index for personal consumption expenditures.[33]

In his statement explaining his dissention at the June 2013 FOMC meeting, Bullard explained his view that the FOMC should defend its inflation target when inflation is below target — as it was at the time of the meeting — as well as when it is above target.[28]

Since the beginning of the financial crisis in 2008, criticism of the Federal Reserve has become more prominent. The creation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 revealed divided opinions on the future of the Federal Reserve. Some argued that the Republican victories in the 2010-midterm elections made ending the Fed more likely, while others, such as former Senator Chris Dodd (D-CT) and Senator Richard Shelby (R-AL), contended that the reforms introduced in the Dodd-Frank Act would strengthen the Fed by narrowing its focus to traditional responsibilities.[34][35][36][37]

Bullard took a public stand in May 2010 in support of Federal Reserve independence and against any move in Congress that would lead to the politicization of the Fed. He has also argued that “The Fed should remain involved with community bank regulation so that it has a view of the entire financial landscape."[38] As a Fed supporter, Bullard has said that the Federal Reserve is “well-designed” as a central bank because it keeps monetary policy decisions away from partisan politics while remaining part of the democratic process. Countries lacking an independent central bank may have poorer economic outcomes (e.g., higher inflation), he states.[39] Bullard has said that the Fed is audited by several entities, including the GAO, and thus is directly accountable to Congress.[40] Some have called for an end to the Fed’s dual mandate of promoting maximum sustainable employment and price stability, a dual purpose questioned by critics including former Fed Chairman Paul Volcker. Bullard has suggested that the best way to achieve both parts of the mandate is by pursuing low and stable inflation.[41][42]

Bullard has called for increased transparency surrounding monetary policy through a quarterly monetary policy report. He argues its benefit "could be improved communication with financial markets and the American public about how the FOMC views the key issues facing the U.S. economy."[43]

He has also called for press conferences to be held after every FOMC meeting, rather than only after four of the eight annual policy-setting meetings. He argues that only holding conferences after specific meetings gives those meetings a perceived added importance. "It's putting too much pressure on these meetings and it is making, in my opinion, the committee sometimes make decisions that are a little bit out of sync with the most recent data," Bullard said. He also added, "I want the committee to have a press conference at every meeting, so that every meeting looks, ex ante, identical. And this would give the committee the freedom to make a move or not make a move at a particular meeting."[44]

Bullard has also argued that the U.S. output gap may not be as large as many estimates suggest — as estimates are based on the notion that output was at, rather than above, potential during the housing-bubble period — which has implications for monetary policy. "It is not that the bubble destroyed potential, instead it is that actual output was higher than properly-defined potential during the mid-2000s, and then it crashed back as the bubble burst," Bullard said.[45]

In a Feb. 6, 2012, speech, Bullard noted that the "large output gap" view is a reason some cite for keeping nominal interest rates near zero for an indefinite period. "If we continue using this interpretation of events, it may be very difficult for the U.S. to ever move off of the zero lower bound on nominal interest rates. This could be a looming disaster for the United States," he said.[46]

In February 2011, Bullard was named in a Bloomberg.com article as “a bellwether person,” an “indicator of where the full committee (of the FOMC) is heading.”[47] Macroeconomic Advisers named Bullard the FOMC’s second biggest mover of markets in 2010 behind Fed Chairman Ben Bernanke[48] and the biggest mover of markets in 2011[49] and 2013.[50] Macroeconomic Advisers noted that, in 2011, his speeches and interviews moved the two-year Treasury yield by almost 17 basis points and, in 2013, he moved the 10-year yield by 29 basis points on a cumulative basis. Since 2010, Bullard has appeared numerous times as a host and commentator on CNBC, CNN, Bloomberg Television, BNN and Fox Business.[51]